Real Estate Financing Vocab 2

Mortgage Disclosure Improvement Act (MDIA)

"Amends TILA to require specific timing related to disclosures that give consumers time to think about the loan they're about to obtain Ex. MDIA also stipulates that the only advance fee that a creditor can charge a borrower (before disclosing the terms of the loan) is a credit report fee.

Hybrid REITs

-Combine equity and mortgage REITs - Get their income from property sales, rent and interest earned form mortgages and mortgage-based securities.

Equity REITs

-Invest in real estate -Get their income from property when it is either sold or rented.

Mortgage REIT

-Lend money for mortgages and invest in mortgages, as well as mortgage-backed securities -Get their income from interest earned from investment.

USDA Rural Development Program

-Offers loans, grants, and loan guarantees for housing. As well as economic development, health care first responder services and equipment and water, electric and communications -Supports loans for businesses -This program makes direct loans -Make loans to make health and safety repairs to their homes.

Corporate Bond

A bond that a corporation issues to raise money to expand its business. Must pay tax on income earned from interest..

Ginnie Mae

A government agency that plays an important role in the secondary mortgage market it guarantees mortgage backed securities using FHA insured and VA guaranteed loans as collateral. Ginnie Mae packages MBS from loans insured or guaranteed by U.S government agencies. FHA, VA,

IOU

A loan from the Federal Home Loan Bank made for a member bank.

Home equity loan

A loan made by leveraging available equity in the borrower's home.

Qualified Mortgage

A loans that meets stringent CFPB(Consumer Financial Protection Bureau) guidelines that are designed to curb lending practices that led to the late-2000s financial crisis. -A loan that a borrower should be able to repay -safer and easier to understand than precious loans -Is a fair deal

Credit Union

A membership-based non profit cooperation with checking savings and lending services. Members can borrow from pooled assets at favorable interest rates.

Participation certificate

A mortgage-backed security issued by Freddie Mac and backed by pool of conventional mortgages

Neighborhood stabilization program

A program, funded by HERA and ARRA, which provided emergency assistance grants to states to purchase and redevelop foreclosed and abandoned homes and residential properties.

Lender Credits

A rebate from the lender to the borrower that offsets some closing costs, usually in exchange for a higher interest rate.

construction loan

A type of Interim financing, specifically for new contraction, with a term between three months and three years.

Home buyer credit

ARRA included first time homebuyer credit from Jan 2009 to Dec 2009 as part of their stimulus package.

Office of Native American Programs

Administers housing and community development programs that benefit American Indian and Alaska Native tribal governments, tribal members, and other Native American organizations.

Fair Housing and Equal Opportunity (FHEO)

Aims to eliminate housing discrimination, promote economic opportunity, and achieve diverse, inclusive communities through enforcement, administration, public education, and development of federal fair housing policies and laws.

mortgage credit certificates

Allows low to moderate income families the opportunity to reduce the federal tax liability, freeing income to make home ownership possible.

Acceleration Clause (Due-on-sale-clause)

Allows the lender to make the loan immediately due and payable if the borrower doesn't abide by the terms of the agreement.

Power of sale

Allows the trustee/mortgagee to sell the property in order to recover losses form borrower default using a non-judicial foreclosure process.

serviceman and servicewoman

American Recovery and Reinvestment Act provided mortgage assistance to ______________.

Farm Service Agency (FSA)

An agency of the federal government that provides credit assistance to farmers and other individuals who live in rural areas.

Home equity line of credit (HELOC)

An open line of credit based on the available equity in the borrower's home.

municipal bonds

Bonds issued by state and local governments. You don't pay taxes on any income earned from interest.

coupon bonds (bearer bonds)

Bonds with interest coupons attached to their certificates; bondholders detach coupons when they mature and present them to a bank or broker for collection. Not as popular as before. If bond certificate is lost, its impossible to recoup ones investment. They were also not registered.

Late charge provisions

Charges for loan payments that are received after their due date; usually stipulated in the promissory note attached to the security instrument.

Seller-paid Items

Closing costs paid by the seller instead of the buyer. This usually refers to items normally paid by the buyer, but in some instances are paid by the seller to help close the sale. FHA and VA loans limit this.

Institutional lender

Commercial banks fall into this category.

Collateral Trust Bonds

Corporate bonds that are secure by the businesses other investments.

My First Texas Home

Designed to help low to moderate income buyers purchase their first home and provides assistance with down payment.

Tranches of CMOs

Different security classes that make up the CMO. They each have their own set of rules for distributing income received from the collateral and have differing balances maturities and risks. Principal is received from each tranche sequentially. Tranche one principal is paid first then it moves on to tranche two and three and so on. Interest is paid to all Tranches at once.

Regulation B

ECOA (Equal Credit Opportunity Act)

Credit Union Membership Access Act

Enacted in 1998, this act allows credit unions to solicit members using a much wider set of criteria

The Farm Credit System Insurance Corporation

Ensures the timely payment of principal and interest on the insured notes, bonds and other obligations issued by FCS.

National Credit Union Administration (NCUA)

Established in 1970. An independent federal agency to supervise charter federal credit unions.

Texas Administrative Procedure Act

Establishes general requirements that state agencies must follow when adopting rules or conducting contested cases, including public participation in rule-making.

Federal Housing Finance Agency (FHFA)

Federal Home Loan Banks (FHLBs) are regulated by_________

Home improvement loan

Financing for home improvements. With terms of up to 5 years.

Loan originator

Generally, an individual that arranges funding or negotiates mortgage loans for a potential borrower.

Community Development Block Grants

Grants from the Department of Housing and Urban Development (HUD) to allow communities to carry out a wide range of community development projects. Improving public facilities, producing affordable housing, help individuals find permanent employment or to keep the full time jobs they have.

The Consumer Financial Protection Bureau (CFPB)

Has enforcement power for unfair, deceptive or abusive acts and practices for financial institutions.

Non-Disturbance Clause

If the owner of the property sells the property or if the lender seizes the property form the owner, this clause prevents the tenant form being evicted. It assures the tenant that his or her rental agreement will be honored.

Nationwide Mortgage Licensing System IDs

Information included in the loan estate for so that the consumer can confirm the reputation of lending institution and individual.

Fannie Mae

Interested in conventional loans from big commercial banks.

Freddie Mac

Interested in conventional loans from small lenders.

Real Estate Mortgage Investment Conduit (REMIC)

Is a CMO (Collateralized Mortgage Obligations) disguised as a company to avoid double taxation. Normally a CMO would get taxed from the income received and then the investors will get taxed too when they receive the money. With a ________ the money passes through the company and straight to the investor. The investors will then get taxed for the income. _________ is treated as a partnership by the federal income tax perspective.

Farm Credit System (FCS)

Is a government sponsored enterprise GSE. It provides financing for agricultural producers, for farm or ranch related improvements, and for housing in rural communities. It is not funded by the government.

Farm Credit Administration (FCA)

Is an agency of the federal government and provides oversight of the whole Farm Credit System (FCS).

Housing Choice Voucher

Is the federal government's program for helping very low income families, the elderly, and disabled individuals to afford decent, safe, and sanitary housing in the private market.

Conforming Loans

Loans that meet qualifying guidelines set by Fannie Mae and Freddie Mac. -Loan amount -Down payment -Loan-to-value ration -Housing-debt-to-income and/or total debt-to-income ratios

Alienation Clause

Makes the entire loan due and payable immediately if the borrower sell or otherwise transfers the property. *Can also be called Due-on-sale-clause

FSA Direct Loan

May be used to: Buy farmland Construct and repair buildings Make farm improvements The maximum loan amount for a direct farm ownership loan is 4300,000. There is no down payment requirement.

Lock-in Clause

Mortgage provision which prevents the loan from being paid off early. Prepayment penalties have mostly been outlawed. Only used on high yield mortgages where the lender wants to ensure earnings.

Collateralized Mortgage Obligations (CMOs)

Mortgages are segmented into tranches (classes), according to their maturity, and the cash flows provided by each tranche are typically structured in a sequential manner.

mortgage-backed securities

Mortgages that are pooled together and sold on the secondary market. Fannie Mae/Freddie Mac buy loans from lenders and they pool them together to form mortgage backed securities which they then sell to investor.

USDA Farm service Agency

Offers direct loans and guaranteed loans to lenders. Direct farm ownership loans are used for -Buy farmland -Contract and repair buildings -Make a farm improvement It's all mostly farm related. No down payment required

Projected payment section

Part of the closing statement Breaks down all costs in the monthly payment Escrow, mortgage insurance, principal and interest, estimated taxes, property taxes.

Cash to close

Part of the closing statement Is the estimated amount of cash the consumer will pay at or receive from, closing.

Cost at closing Section

Part of the closing statement that goes over Estimated closing costs: amount charged to get the loan And Estimated cost to close: the amount the cline twill pays t closing

Government Sponsored Enterprises (GSEs)

Private companies such as Fannie Mae, Freddie Mac, and the Federal Home Loan Bank, created by the U.S. Congress to make borrowing easier and more cost effective. They are not government entities, but are backed by the U.S government. They are regulated by the Federal Housing Finance Agency (FHFA)

Exculpatory clause

Protects the borrower's other assets in case of foreclosure. The lender cant ask for a deficiency judgement when the borrower is protected by this clause. A general legal term that is related to the non-recourse clause.

FSA Guaranteed loans

Provide lenders with a guarantee of up to 95% of the loss of principal and interest on a loan. FSA guarantee permits lenders to make agricultural credit available to farmers who may not meet the lenders normal underwriting criteria.

Texas Statewide Homebuyer Education Program

Provides education and counseling resources to homebuyers.

Administrative Procedure Act (APA)

Provides oversight and regulation to agencies and their roles. It is an effort to balance the potential for a too-powerful federal government. -Requires agencies to inform public on how they are organized -Provides public participation in the rule making process -Establishes uniform standards for the conduct of formal rule making -Defines the scope of judicial review

Cross-default clause

Puts the borrower in default on all loans if the borrower defaults on any loan where the clause is included.

Tax Reform Act of 1986

REMIC was created as a result of ______________

Consumer Financial Protection Bureau (CFPB) was created to

Regulate non-bank lender. These types of lenders were the largest originators of subprime loans.

Texas Safe Act (T-SAFE)

Required states to enact licensing and registration requirements related to loan originators, and it created the Nationwide Mortgage Licensing System and Registry (NMLS) through which mortgage loan originators must register. T-SAFE requires individual making five or more owner-financed loans per year to get a mortgage loan origination license No license is required if seller is providing seller financing to homestead property to a family member.

Prepaids

Section in the Closing disclosure. These are Items included with the borrower's monthly payment that are due before the first scheduled payment of the loan.

Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)

Sets a minimum standard for licensing and registering mortgage loan originators (MLOs).

Interim financing

Short term loans obtained to finance a construction project and is usually open-ended.

Defeasance Clause(mortgage)

States that the borrower will Reagan full title once the debt is fully repaid. Same as Reconveyance clause

Reconveyance

States that the borrower will regain full title once the debt is fully repaid.

Farmer Mac

The Federal Agricultural Mortgage Corp "The supportive roommate of Farm Credit System (FCS)" Doesn't offer loans. It is a customer in the secondary market that buys loans from agricultural lenders and sells financial instruments backed by these loans. This allows agricultural lenders to have the funds to make more loans. Farmer Macs role is to guarantee timely repayment of principal and interest to investors in the secondary market

10 days

The Loan Estimate expires in __________ if you don't tell your lender that you want to move forward.

$15,000

The amount someone can gift an individual per year without having to pay tax on it.

Truth in Lending Act (TILA)

The part of the Consumer Credit Protection Act, this requires full disclosure of the terms and conditions of credit.

Pre-payment clause

The provision allows the borrower to prepay the loan at any time without penalty.

Chapter 5 of the Texas Property Code

This code places specific and strict initial and ongoing requirements for executory contracts.

Real Estate Settlement Procedures Act (RESPA)

This law prohibits kickback and referral fees among settlement service providers to make settlement more understandable and affordable for consumers.

Home mortgage Disclousure Act (HMDA)

This law requires documentation to show that lenders are serving the housing needs of the their communities. ->HMDA requires lenders to collect, maintain and report data on lending practices. ->HMDA data includes: Mortgage applications, loan amount, type of loan, and loan purpose.

Housing and Economic Recovery Act (HERA)

This law was designed to address the subprime mortgage crisis. Provisions included the SAFE Mortgage licensing Act and the Mortgage Disclosure Improvement Act(MDIA). This also lead to the creation of The Federal Housing Finance Agency.

Community Reinvestment Act (CRA)

This was created in response to the practice of redlining And was enacted in 1977

Demand Deposits

Those made to a checking or traditional savings account. Must be made available upon demand. Commercial banks rely mostly on this these for their supply of funds.

USDA loan through FSA

To be eligible for a _______, and applicant must have participated in farm or ranch management for at least three years.

Manufactured home loan

Used for purchasing manufactured homes, with terms starting at 10 years. Longer loan terms are bailable to finance for homes permanently attached to their foundations.

Partial release clause

Usually seen in an instrument used for a new subdivision. Requires the lender to release a portion of the property form the lien when a part of the debt has been paid.

The National Credit Union Share Insurance Fund NCUSIF

Was established to ensure credit union deposits

Collection fee

When Fannie Mae purchases a loan, they pay the loan originator a ___________________.

Participation financing

When the lender requires an equity position in the property being financed Life insurance companies can guarantee their investments by insisting on an equity position through (Participation Financing)

Non-Recourse to seller clause

When the original lender that made the loan sells the security instrument (mortgage/deed of trust) to someone on the secondary market, the lender can have a "__________________" that would protect him from having to refund the buyer if the borrower(in the primary market) defaults. If the security did not have this clause, the original lender will have to refund the buyer of the security.

The Consumer Financial Protection Bureau (CFPB)

Who regulates the Equal Credit Opportunity Act (ECOA)

Ask your lender about it

You received a loan estimate and noticed that under other costs that there are items listed that don't include an amount. What does this mean?

Subordination Clause

a clause allowing a lender to move to or take a lower lien position to new loan using the same property as collateral.

NON-RECOURSE CLAUSE

a clause that prohibits a lender from seizing any property outside of the property that the loan was secured with. It's a type of Exculpatory clause.

Deficiency Judgement

a judgement of a court that permits a secured lender to recover other property or income from a defaulting debtor if the collateral is insufficient to repay the unpaid loan.

Texas Department of Housing and Community Affairs (TDHCA)

an agency responsible for affordable housing, housing related and community service programs, and the regulation of the state's manufactured housing industry. My first Texas home Mortgage credit certificate Texas statewide home buyer education program

Mortgage Bonds

bonds secured by a lien on a property.

Equipment Trust Certificates

bonds secured with factory and equipment as collateral

Secured Bonds

bonds that are backed by specific collateral that must be forfeited in the event that the issuing firm defaults.

Unsecured Corporate Bonds (Debentures)

corporate debt not secured by collateral such as land, buildings, or equipment.

Mutual savings banks

financial institutions that are similar to savings and loan associations but, like credit unions, are owned by their depositors. -Primarily contracted on east coast -are individual charters in different states that vary in set limitations for lending activities. -Funds put into the mutual savings are put into conservative long term real estate loans backed by mortgages.

The Federal Farm Credit Banks Funding Corporation

is the fiscal agent for the Farm Credit System Banks. Because FCS institutions don't accept deposits, they rely on the funding corporation to raise money for loans and leases through the sale of FCS debt securities in the U.S. and international money markets. It also provides disclosures and public information about the financial condition of the FCS, and assists FCS banks with managing their interest rate risk.

Loan Terms Section

part of the closings statement Loan amount, Interest Rate, Monthly Principal and Interest. Prepayment Penalty, Balloon Payment.

Know Before You Owe

requires disclosures to assist in informing the consumer before signing

Coupon rate

the interest rate that a bond issuer will pay to a bondholder. The municipality that is borrowing money from the investor will be paying the investor a coupon rate(type of interest rate).